Edit: I am going to broaden things to allow more possibilities. The shortened version does not have to be an English word. For example, thorough and thoro I feel are close enough to count as removing three letters. Also, things like though and tho definitely count! (This is the best example so far by my standards.)

There a number words where you can remove the last three letters and and up with almost the same word: thorough etc.
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Jonathan LefflerMar 31 '11 at 16:40

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@Jonathan, I don't think misspellings like thoro ought to count. Did you perhaps mean though - tho? The latter is an informal abbreviation, but is acceptable in certain contexts.
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MarthaªMar 31 '11 at 16:55

3 Answers
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I think your friend is probably correct. Queue is an example of a word that is pronounced the same way as the name of its initial letter, and while there are other examples of that, none of them are 5 letters long.

B - be, bee

G - gee

J - jay

K - 'kay

P - pee, pea

T - tea, tee

The other possibility would be words which have a bunch of silent letters, and an alternate spelling without those letters, but I can't think of any with 4 silent letters that happen to occur at the end. (For example, you can remove one letter from colour without changing its pronunciation.)

Edit: there's through - thru, but that removes the last two letters plus one from the middle; and though - tho, which removes three letters (and ends up with a spelling that is only acceptable in limited contexts).

I am looking for things like the words in your edit. Though and tho is my favorite example so far! Do you know any others? The shortened form doesn't necessarily have to be an English word, but its pronunciation should be what you get from first reading. (Using judgment) Thanks.
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user6751Mar 31 '11 at 19:38

If proper names are allowed, then there are some good (3-letter-removal) examples among place-names with the suffix variously spelled borough or boro. There are, for instance, many Scarborough’s and at least one Scarboro; several Westborough’s and also several Westboro’s; and so on.

(In the UK, -borough names are also often abbreviated to -boro on road signs.)

If we look at removing interior letters as well, then Leicester vs. Lester and Gloucester vs. Gloster are also examples.